There is gold at the end of the rainbow!

Good news! – claims departments are now flooded with great data.

Seems like great news doesn’t it. It is great news, or can be, if you’re using the data to help improve the operations, lower cost or predict the future. However, many firms aren’t using the data they have to provide valuable information for the operation.

With the advent of more modern claim technology there has been a push to input more and more information about claims. Claims professionals are being asked to capture very specific fields of information presumably to be used by others within the organization. In addition, more sophisticated data models are combining claims data with underwriting and financial data that when used correctly can be a treasure trove of information.

With all that information available what is the best way to use the information?

At the very least data should be used to manage the operation, reveal trends, or be predictive.

Metrics to Manage the Operations

At the core, information coming out of the claims system should be used to manage the people handling files. Daily, weekly, monthly quarterly and yearly metrics around performance issues should be used to ensure claims professionals and support staff are performing at their best, responding to claims promptly and managing workloads and staffing levels. Typical metrics to manage the operation would center on matters coming and going out (i.e., open, closed, closing ratios); aging reports (i.e., throughput, time from receipt to setup, open to close); workloads (i.e., caseloads and closing ratios by adjuster); or financial in nature (i.e. reserve changes from one period over another, average reserves, total paid).

Metrics to Reveal Trends

There are trends in your data if you know where to look. Trends in loss frequency and severity, which may be caused by external factors, such as legislative, environmental and economic forces, are all developed from claims data. Trending claims data will help underwriters ensure pricing and terms are appropriate and allow problems to be addressed before they become disasters. There are numerous examples of companies that succeeded because they were able to review claims trends and adjust their business before it was too late. There are conversely many companies that failed because they did not have or use their claims data to spot deteriorating books of business in enough time to address it. Information from claims is the lifeblood of the organization and should be identified and regularly shared to help the organization make better decisions about loss reserves, risks, investments, and resources.

DirecTV Inc. used claims data from the past several years …to help it manage claims more aggressively for its installation crews…DirecTV used the claims data identified to implement changes to its safety programs, its training programs and its return-to-work strategy…. The claims data also showed opportunities to improve fleet risks. Over a three-year period, the safety changes resulted in a 43% reduction in calls on the Driver Alert phone line. The data also found delays in reporting claims and lengthy lost time due to worker injuries. As a result, the company implemented a formal return-to-work program, which resulted in a significant decrease in lost time, and used additional training on claims reporting to reach the point where 91% of claims now are reported within three days of an incident.

Metrics to Be Predictive

Using data is not just about spotting trends but predicating outcomes. Using predictive analytics is not about deciding claim outcomes without the involvement of skilled claims professional, but rather it is about providing a tool to assist in the process. Predictive analytics can correlate multiple aspects of data and draw conclusions in an instant that claims professionals would not be able to do without hours of analysis. Predictive analytics tools are being successfully implemented to combat fraud and streamline the claims intake process as Gen Re noted in Predictive Modeling – An Overview of Analytics in Claims Management, some other uses of uses of predictive analytics include determining:

Outlier Claims

Reserve and Settlement Values

Defense Strategy

Litigation Expense Management

Subrogation Potential

The benefits, if used correctly, are limitless when robust data sets now common in the claims world are used. More and more companies are using analytics to improve operations. In fact, according to a Towers Watson study in 2012, 63% of Chief Claims Officer’s surveyed stated they were starting to use predictive analytics in in their claim’s operations (see study).

Predictive modeling has been limited in the past because systems were not as robust and the amount of data available to run data models was limited. Times, however, have changed and most carriers should have more than their share of data that could prove invaluable. Of course data integrity must be as clean and accurate as possible for these new models to be effective. Regardless, the possibility for significantly improving claims outcomes is compelling.

There are many elements to a well run claims department. As with many areas of business it comes down to people, process and technology. Good people will drive the success of any department and working with defined efficient processes, as well as technology tools that support the organization, are basic core requirements to any well run department. Specifically what people, processes and technology make up a good claims department is a subject for another day. Regardless every claims department should be using metrics, performing audits and have a business continuity plan in place as a minimum. Take our survey too and let’s see what companies are doing on these three.

In life change happens and people adapt. In business change happens and people react. Those who are resistant to change are usually easy to spot and equally as easy to manage and therefore rarely derail a change initiative. However, it is the person that generally supports change and outwardly appears to be working for the implementation of a new initiative that can sometimes harbor a “competing commitment” that can have a more deleterious impact on the success of a new initiative.

In today’s ever expanding global marketpalce, the need for executives to be aware of potential liability exposure is greater than ever. To assist in understanding that exposure, we review the the Global Directors and Officer Handbook, published the ABA (get your copy here) and Edited by Perry Granof and Henry Nichols.

Change is hard for everyone and how and when to change has been debated and discussed in companies since the first company was formed. What is never debated are some of the excuses used for not changing. People are generally resistant to change and despite the need to move forward people generally prefer to live with what they have. Taking a strategic approach to the issues around change itself shuold help to alleviate some of the resistence. In this post we look at changing the way we change.

In Leadership: The Change Process In Claims Requires A Different Approach, I put forth the position that changing a claims organization needs a new brand of leadership skill that does not usually exist in the traditional claims organization. In Part 2 on Leadership: Developing a Strategic Transformation Team, I addressed how to break from existing management process to achieve effective strategic results. In the final installment, I discuss how challenges around leading change make it beneficial to bring in strategic support to help achieve the desired success.

Breaking from the linear approach to management is the key to leading Strategic Transformation. A standard organization will have a head of claims and then a variety of department heads to manage each line of business. Depending on the company there may be additional senior managers to handle various operational aspects of the group, which may include support staff, call center, technology and data analytics. Under this method, projects get initiated and managed within the same linear organizational framework. The result of this approach is a development process built in a silo that limits input and understanding of possible interdependencies that may exist outside the framework. In this post we will explore further how a strategic transformation team is formed and can be effective.

Successful organizations are always changing and adopting to improve their operations, lower costs and increase efficiencies. Claims departments are no different and have been under pressure to transform their operations and live by the mantra of doing more with less. Good claims organizations continuously evolve and adapt to ensure they add value to the overall business. Regardless, changing to meet the challenges of the marketplace is often fraught with problems and difficulties. Many initiatives fail to get off the ground or fail in the implementation process. Change can be very successful and if managed and led correctly. To change effectively there must be a strategic approach and a change in how these initiatives are led.

Here’s a challenge! Let’s redesign the claims industry. Yes innovation has improved the world of claims over the past few decades to make claims more efficient. As recent catastrophe’s have shown, the industry is much better at responding to losses than in years past. Regardless, claims functions in an assembly line approach. This has of course been a huge improvement and like manufacturing has helped to produce a better more consistent product. Today’s world allows us to collaborate more so my challenge is to tap into your collective experience and come up with even better ideas. What do you think?

All things being equal there are many fine TPAs in the market that will provide wonderful service to your insureds in a cost effective and comprehensive manner. Initially you think you have chosen a good one. However, as time goes on you realize you are not exactly getting what you expected from your TPA. So what happened?

It matters little what your reasons for outsourcing were. Bottom line is if you didn’t take certain steps to properly select and manage a TPA you are likely to end up with problems. The partnership you form with your TPA will be fruitful if you take key steps to select and manage them in a way designed to foster long term success.

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About The Claims SPOT

Bringing together the best and brightest claims experts to SPOT claims issues and trends. At The Claims SPOT, our goal is to provide information to help claims professionals, and organizations, be more efficient and do their jobs better.

The Claims SPOT is edited by Marc Lanzkowsky, Managing Director in the Global Insurance Services Group of FTI Consulting Inc.